Gyroscopic Investing

I have seen Taleb's "barbell" portfolio (80-90% T-bills, 10-20% super-high volatility options) discussed briefly in a couple of threads here. One of the main objections to Taleb's portfolio seems to be that its returns are very lumpy; it loses a small amount of money most years and has a huge gain maybe once every ~10 years. Also, Craig mentioned that he thought the Taleb portfolio would be too expensive for most investors to implement (presumably because of the options).

I'm curious as to whether anyone has done any backtesting of the Taleb portfolio, perhaps assuming several different kinds of options for the 10-20% speculative portion.  It would be fascinating to see a visual representation of the Taleb portfolio returns vs. HB PP over a few decades, and also to see how much variability the Taleb approach shows as a function of the types of options selected for its speculative portion.

The good thing about the HP PP is that it is an "everyman" or "everywoman" portfolio.  Practically anyone can implement it, even people without brokerage accounts.  And aside from an ability to read and understand the purpose of the portfolio, one does not need any special skill or education to be able to do it.

This is not likely the case for portfolios based on options--especially the kind rarefied enough to be called "super-high volatility."

I find his approach interesting, but I don't think the other 10% is defined.  My understanding is that it is whatever low probability event you want to bet on.  This would rule out backtesting.

As part of a VP I think it might be fun to try, although I agree with smurff that most people (perhaps myself included) would never be able to stick to something like that.